Bucking the trend of most other analysts, Merill Lynch predicts rosy future for Xbox 360

Although most analysts have said that the PlayStation 3
would maintain Sony's lead in the console market in the coming years, an
analyst for Merrill Lynch is bucking the trend and is giving a nod to the
Xbox 360. Sony has held the lead in the console wars with the original
PlayStation and PlayStation 2, so what would prevent the PlayStation 3 from carrying
the crown this go around?

There is no doubt that the PlayStation 3 will face
formidable competition from its cheaper Xbox 360 and Wii rivals, but Merrill
Lynch's Yoshiyuki Kinoshita says that it goes much further than a low price
tag. "The winner in the next-generation console battle is likely to be the
Xbox 360, which is the leader in North America, the world's biggest
market," said Kinoshita.

Kinoshita points to early production problems
with the PS3 and Microsoft's one-year head start as insurmountable barriers for
global dominance by Sony this time around. On the other hand, production
problems can be worked out and one shouldn't dismiss Sony's larger fan base.
Despite this, Kinoshita predicts that Microsoft will retain a 50% share of the
North American market by March of 2011 with Sony and Nintendo commanding 27%
and 23% respectively.

In the overall global market, the race will be much tighter
with Kinoshita still giving the edge to Microsoft overall. "We forecast
respective market shares at end-FY3/11 (March 2011) of Xbox 360 [at] 39
percent, PS3 [at] 34 percent and Wii [at] 27 percent, thus overturning Sony's
domination of the market with its PS2-based share of 69 percent, and doubling
Microsoft and Nintendo's respective market shares."

This is a race that everyone will be watching closely. The trash talking and prodding on behalf of
both Sony/Microsoft execs and respective fans have been fierce over the past
year, but it will still be years before we see which console truly comes out on
top.

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Agreed. And only a complete idiot would pull for one console over another (unless you own stock or work for MS gaming division). The fact is that the whole Sony vs. Microsoft competition is good for the gaming industry, and consumers alike. You may want to root for your system like some pathetic sports fan, but if Sony or MS do happen to fail, then we'd all be stuck with one monopolistic company, forced to pay their prices, deal with only their practices, and forced to deal with the lack of innovation. Die fanboys, the industry can't afford for either system to fail.

(and no, I haven't forgotten about Nintendo, their market isn't the high end gaming market, so they don't always factor in)

Errr, I don't own an Xbox 360 nor will I own a PS3 but if I happened to own either of course I'd "pull" for it. A greater market share means that more games will be developed for that system, which would make those who purchased that system even happier with their purchase. Just because you chose to remain "neutral" doesn't mean that everyone else has to.

It's simply very short-sighted, that much should be obvious. Fanboys are the bane of the consumer existence, and xbox ones are almost as bad as apple fanatics. It's just a product people, not a religion.

Well, you're making an assumption that he is pulling for the system because he's biased against it.

Let's think of other reasons you might want the PS3 to fail.

-It's too expensive for the market, and you hope soy realizes it one way or another

-Sony has been doing all it can to slow down the tech industry recently, they need to be sent a message

-The comments from Sony's people have been condescending towards consumers, unacceptable

-Sony's products have had tons of issues: PSP had tons of dead pixels, the PS3 doesn't play all of the PS2 games, etc.

This is in addition to the fact that nobody is forced to deal with anything. Wait! That's the exact reason the PS3 *might* fail to begin with! If MS were to then go and charge $600 for a 360, nobody would buy it.

Wow you shouldn't post stuff up if you're being biased about it too. The xbox 360 can't play all xbox games either. And, xbox had that major problems with that whole batch of xboxes sent out. My friend already had to return his xbox 360, and now the one he just got needs to get fixed. My other friend's xbox overheated and made circular cut marks all his video games. And the reason why no one would bye a xbox 360 for $600 because it's not worth $600. Check out this link, and then tell me what you think.
http://www.macworld.com/news/2005/05/17/xbocps3/in...

I didn't think it was possible for someone to have such little understanding for the market place, or to be so blinded by fanboyism. Whatever your problem is with Sony as a company has made you way too biased to have an informed opinion.

Point for point:
-The PS3 is NOT too expensive for the market, as has already been proven by people willing to pay the price and more. Just because you can't afford it, or don't like that they made it more than just a game console is your own problem, and is unlikely to hurt their sales in the least.

-Revenge against a market leader is just stupid, you can't hurt them, but their collapse would hurt all of us. Go ahead and reward good behavior, buy from companies you think are good (BTW: if you do think any of them are good, than you really are misinformed) but punishing bad is just moronic, it would leave us with a monopoly from a company whose track record is little better than sonys.

-Again, pointless fanboy grudge. Every comapany spokesman is an ass.

-Sonys problems are not unique to them in the least. Or have you already forgotten ALL the problems with the Xbox and the 360?

So you hate Sony? Who cares, that's pointless. Just think, what if they were the only game in town? They're a product of their success, MS would be no different.

I think Wii will be the most popular personally because of the free online play and a ton of publishers this time around plus a new innotative design with there interactive controllers that kinda thing has never really been done before at least well and combination of the 3 along with a cheaper price tag both to buy and for the games themselves is bound to be popular. The origenal playstation was so popular mostly because it had nice graphics cheaper games and a variety to choose from. The multiplayer facet of gaming is a big part of Xbox's success as well, but the priemum and monthly fees associates with there xbox live service might deturr players. People that play consoles games play them mostly for the improved controlls and easy learning curve most of the hard core gamers and multiplayer crowd tend to play on the PC. The Wii is perfect for multiplayer games that don't really exist to much for PC sports and fighting games plus it's cheap. It'll fit nicely into lan parties and such too.

I agree, the Wii may also have another advantage thanks to launch titles (and follow up titles).

I haven't had any real desire to pick up a 360 until Gears of War, but the Wii has Zelda on launch day. Nintendo really seems to be aggressive in pushing the games they know people are really wanting instead of leaving them hanging for 2 years.

Good comment. It's been my observation that the general public prefers so-so performance at a lower price than high-performance for more money so long as the lower performance level is "adequate". This also is why I think the Wii will do very well. The most important single factor is price (by my observation of the consumer market in general). The part of the market that's hard-core gamers may be different, so the question becomes "what percentage of the overall gaming market are the hard-core gamers?".

I'm not sold on any of the three next-gen systems yet although I will give a nod to the 360's controller over the PS2 one. Why is Sony just selling us yet another version of the same lame old PS1 controller? I wonder if I can get a Xbox 360->PS3 controller convertor, maybe I'll just get a 360.

Has anyone ever gone back and done statistics on all of these analysts? Like how many things they've predicted right, vs how many predicted wrong? It would be interesting to see how badly they all suck.

He doesnt take into account, the huge following that several playstation only franchises have.

Like most people in his industry, he just looks at numbers. This gives him a huge disadvantage when making "guesses" such as this. Series such as Final Fantasy, Devil May Cry , Metal Gear Solid, ect will sell units just on their own. And those are just 3 of quite a few series , that you will only see on PS3. Q

No matter what console you choose (if you choose only one for this generation)the gamer is the winner. I really think the race between the 3 consoles will be much closer than these guys imagine, as everyone has a different strength. I hate Microsoft, but if anyone comes out on top this generation (yep, it's no longer the "Next Generation") it will probably be them. It's good for gamers as the close competition will force each of the 3 to work their asses off to innovate and create better games. I would love to see Nintendo come off on top, since their profits will be much higher they'll have better investor support and more third party software companies developing for them.

"The winner in the next-generation console battle is likely to be the Xbox 360, which is the leader in North America, the world's biggest market," said Kinoshita.

Unquote-
Sorry he does not put out enough evidence to back up his claims.Its vague & unconvincing in short.
A one year period of sales figures & consumer survey will definitely give a more accurate picture or estimates or predictions.

Let me put some flesh on Mr. Kinoshita's argument. First, he noted the Xbox 360's one year headstart. This is indeed very important. The chief advantage to Microsoft comes not from the fact that it has managed to sell 10 million units during this time, but that the company has a huge lead in reducing the cost of making the console. Historically, the bulk of a console's sales occurred when it price had dropped below $200. Nothing suggests a big change in the consumer habits. Those who bought the PS2 at $179 are not going to spend $400+ for a PS3. Microsoft is much closer to this threshold than Sony. When the a low-end Xbox 360 sells for $199, the PS3 will likely still cost well over $300. The one year headstart, combined with the huge initial price difference, gives Microsoft an at least two year head start in the high-volume mass market.

Mr. Kinoshita also pointed to the PS3's production problem. While the Xbox 360 suffered shortage initially too, the nature of the difficulties facing Sony is very different. Microsoft had glitches in its supply-chain, which were quickly resolved by hiring a third OEM (Celestica) and shifting more transport to the air. Sony is facing a shortage of a critical component--the blue-red diode in the Blu-Ray drive. It's not a problem the company can buy its way out of. The technology is so new that there aren't too many firms making the thing (red laser diode in DVD drives, in constrast, has been around for a couple decades). Expanding capacity means bringing new equirpment online, which takes time and huge sum of money. And we should recall that the PS3 launch was delayed for 6 months. If given the extra time Sony still failed to secure an adequate supply of diodes, the problem must be very serious.

It all comes down to a single blunder: trying to force Blu-Ray onto consumers.

He doesn't have to know how to play. He is a business analyst. He just has to be good at reading numbers, judging markets, and predicting business forecasts. And at that task, I'm sure he is better than I am, so I'll respect his statement. Even if I, and many other people, most certainly would just destroy him at most games.

There is something to be said about people who aren't involved with an industry, though. I've made a reasonable amount of money investing in companies who released great products (Read: AMD), but wouldn't start making money on them for months down the road.

Remember when the Athlon 64 came out? Anybody who read this site knew how screwed Intel was and what a strong position AMD was in. How was their stock doing? Poorly. I think it was like $10 per share or something. I picked it up and made a decent amount of cash on it.

Anyway, my point is that analysts track numbers, they're not the target audience - they can only speculate about whether the product they're analyzing is what consumers want. WE'RE the target audience, we know whether the product is good or not.

The fact is that while nobody can say for sure, Sony appears to be in a position to lose a lot of customers. Nintendo appears in a position to gain marketshare. I'm certain MS won't lose any.

The end result depends on us and our opinions. If I were to judge based on comments on DT, I would say Nintendo and MS are in a position to both overtake Sony, at least in this generation.

Well, that number is far fetched assuming everybody isn't using their old systems. If the analyst was suggesting that at the end of the lifespan of these systems, you total sales, and Sony has 37% of the market, that's not far fetch.

Did it ever occur to you that some people actually enjoy doing their job? It's like wondering why professional athletes don't quit after making a few million bucks--there are aspects of life that are unattainable by money, and some find satisfaction from being good at their job. I'd imagine many analysts (especially good ones) enjoy helping others get rich as well, and they might like the action of picking winners. If everyone lived for only themselves, we'd all be screwed.

you said it, he's a business analyst, and like the rest of them, he runs out of things to analyse when he tries to look into the future.

What this guy is doing is playing a game... with his other business analyst cronies, he is using one particular set of facts to try to determine that his position is correct. All very nice you say, but what I think he is looking for is potential bragging rights. So, in 5 years time when the winner of this console generation has been determined, if that winner was indeed the Xbox360 then he'll be able to use the fact that he was the first person ever to predict it to lord it over his analyst buddies.

So if a food company came out with $9 Million dollar frozen dinners intended for the mass home market, and an analyst who NEVER had a frozen dinner and always eats in restaurants thought it was over-priced in his analysis and wouldn't sell (but knows the price of every frozen dinner because that IS his business) you'd say he hasn't a clue?

Sony's unit is much more expensive than previous units. It has few games available for it. It's a year behind major competition. It's made by a company with major PR black marks (Laptop batteries, failure in the plasma display tv market, etc). All not good signs even if a unit has never been used.

You're saying that there is NO WAY Betamax VCR's couldn't beat VHS in the market?

I agree that I don't think Sony's market position will slip that much, but I do think it'll be slipping a significant amount. But I also think the analyst has a reasonable stance even if I don't agree with it. His *could* be true.

I read a few days ago that the sales of the Xbox-360 went up (in Japan I think) six fold a week or two before PS3 release. I think it was from those who were waiting to see the PS3 and it's retail price before deciding and they finally decided (for the Xbox). Something that favors the Xbox I think.

Now it's just too easy, spotting blatant bias on this site is like shooting hobos in a barrel. This article title is a border line lie. ML didn't state the 360 is going to 'win' the console battle, one single solitary analyst out of hundreds, is stating that the 360 will win. Even reporting this as news is questionable. At least fix the title, try to pretend to be impartial.

Realistically analyst say things like this all the time, but in the more trusted companies like M-Lynch I feel are listened to more. And why does this matter ? Because the people who listen are other companies, like software developers who make titles and take risk on making exclusive titles.

Its not like this is the only big company recently or only developer who says they dont like the PS3 situation or have as much faith in it then their previous console PS2

IS THIS GUY CLUELESS - ALL YOU HAVE TO DO IS LOOK AT THE DEMAND, XBOX NEVER CAME CLOSE TO THE DEMAND ON THE PS3 IN PRESALES - AND THIS IS NOTHING TO SAY ABOUT REVIEWS. SIMILAR TO THE ZUNE, THE SHELVES ARE FULL OF THEM ON THE OTHER HAND PS3'S ARE SELLING FOR $3,600.00 ON EBAY RIGHT NOW.

ANYBODY AT MERRILL LYNCH AWAKE - YOU BETTER FIRE THIS GUY BEFORE YOU LOOSE YOUR MILLIONS!

Reviews mean very little. This is a financial analysis, not a hardware review. In thier opinion, PS3 will lose. It does hold alot of weight, considering all of the issues with it, and the overbloated price/blue ray debacle and compatibility issues. On top of that developers are not happy programming for it, and Xbox has a 1 year head start. There are many more issues, but you get the point.

analyze this - ps3 selling between 2,500 - 9,999, sustained for 2 days now. This is not speculation, and they are going about 1 every 1-3 minutes.

To have that going on for such a time frame is unseen. Reviews comment was added to emphasize the aura around the unit. Another thing Xbox can not touch. Granted it is imaginary, but it exist. Same thing with the iPod, it is a 'Phenomenology' and once a product acquires that, it is extremely difficult to overcome.

Yes, and now reports that PS3 auctions in Japan are going down because alot of people who bought a PS3 in Japan bought it for re-saling it.. not because they actually want one is not encouraging considering mainly only 88k were sold.. it makes you wonder how many really want it.. There were never any reports the 1st week the 360 was out that its actual demand was lower then auctioners who were selling them.. and prices reflected the demand for 360 on auctions for months !

you don't buy a ps3 for 9,000 to resell it, you don't buy a ps3 for 3,000 to resell it. There were never any report on the 360 because there was nothing to report.

Trying digging around for reports on the incredible demand for Zune - You won't find any because there isn't any. The opposite is true for what happened to the iPod and for what is happening to the PS3.

I don't see how gouging the price of an item that effectively has no retail presence has anything to do with its future success. Those prices will drop when 20,000+ actual ps3’s hit ebay and the nutjobs who spend 3 times the retail price on an item are satisfied. There is really no compelling reason to actually own a ps3 right now (you know, and remove from the packaging...I guess maybe if you really wanted a beta-ray player); it’s an unknown quantity, with no killer app.

Not to say that it’s any different from other system launches. As a general rule, launch titles almost always pale in comparison to titles released one year or even six months in. It also takes time to work the bugs out of the hardware (ps2 and 360 launch hardware had plenty of problems), who wants to walk into something like that? Sony lowered the clock of cell, whose yields are still horrible, just so it could push ps3 out the door because if it delayed any longer people would be wondering not when but if it would be coming out.

I own all 3 members of the current generation and have been happy with them all, Okami, FF, GTA and GT3/4 on ps2, Halo/2, Forza and Ninja Gaiden on Xbox, Super Smash, Mariokart and Zelda on cube. They all have games worth owning the system to play. Not so much yet for 360 and ps3. The software is starting to show up for 360, but ps3 is just getting started and everything I’ve played for it so far has run like the poorly optimized code it is.

Things will be a lot clearer in a year, but right now, 360 has the momentum (and the software), and ps3 has a few months before you will even be able to reliably find it in retail again. Wii is good for the industry, and I’ll actually be waiting Saturday night to get my hands on it and Zelda (I’ll get 360 for Halo3 and maybe ps3 for GTHD if the price ever comes down, which it will). I can trust Nintendo to deliver on its promises, unlike sony (sorry, but if you handle absolutely everything you do that poorly, well, where there’s smoke…). Nintendo choose its own path, and the experience of Wii will be quite different from anything that sony and microsoft have, its making its own market.

Oh, and zune has no place here, and it’s in the same position as ps3, which is barely on the market yet. Really that analyst did a pretty good job, and I’m sure that they know a lot more about actual business related predictions than a bunch of fanbois who marvel at a every shiny thing they see (sustained demand my ass, wow, two days of idiots on ebay, come on, please, anyone can find better support for their argument than that). Like I said at the beginning of this, ebay demand doesn’t mean shit in the long run.

Yes, there is a high demand. Alot of people are buying to resell it for a huge profit, and alot of total nerd losers cant seem to wait another few months so they are paying rediculous premiums... So, whats your point? It will come down to earth very soon, and very hard.

Sony doesn't see any of that price gouging profit anyhow. On the other hand, Sony loses $300 per unit, so in a way, I hope they sell a hundred million of them... LOL

I had a discussion in a class today with about 20 other people and only a few of them even cared about the 360 and only 1 actually had one. Everyone else was waiting for when PS3s are actually available and have some actual games worth playing.

A few people were talking Wii but the general consensus is that the controller is too far out there. It is a good idea and seems cool but who wants to try and play some late night gaming and have to wave your arms around like some asshole? Are you going to want to play like that all the time. Can you actually play without motion sensing?

I know it was a small sample but I have had similar conversations and I find that people are waiting for PS3 because they have generally been happy with what their PS2 offered. If anything the 360 seemed like the least popular system discussed.

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